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I am trying to research someone who wants to do business with me. UK companie's house does not seem to have a profit & loss on file, just an abbreviated balance sheet?

I removed the company umber, filing date and figures less than a thousand, to offer some privacy.

It doesn't look very healthy, but three's not really enough detail for me to tell. I am especially missing the turnover & profit margin.

Can anyone here infer something from this, which is not readily apparent?

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[Clarification] I risk no money here. I will provide my time and the other company has an idea and some business contacts. It's a bit of a punt, but all that I risk is my time.

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    I agree it doesn't look at all healthy at a basic level. Do you know how long the business has been operating? However, if you are going to go into business with someone surely you have a good enough relationship to ask them about this? Then use your gut feel about their answer (and the way they give their answer) to determine whether it is really a worry. – Vicky Jun 25 '17 at 18:03
  • The business was started in 2012. Had an office for a while, but is now run from home. Not a good sign, but the deal is one where I put in tie & they have the contacts> I risk nothing but a lot of time, but was hoping that someone who know accountancy can read something from that, beyond the declining trend. Maybe some ratios... – Sam Fox Jun 25 '17 at 19:19
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What this abbreviated balance sheet tells you is that this company has negative equity. The liabilities are greater than the value of the assets. The obvious problem for the company who wants to do business with you is that they are going to have a real hard time accessing credit to pay off any debts that they incur with doing business with you. In this case, the recommended course would be to ask them put cash up front instead of putting them on account.

You don't really need to look at the income statement to see that they are currently underwater. If their income statement turns out to be splendid, then you can wait for them to get their liabilities under control before you set up an account for them.

  • With less than 15 rep, I cannot upvote you, sorry. I would be keen to see their P&L, as you say, but that seems unlikely. I have updated the question a little (added info to explain how the project would work, and explain that I risk no money, only my time) – Sam Fox Jun 26 '17 at 8:31
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    Why don't you ask the other party to supply you with their detailed financial statements ? – DumbCoder Jun 26 '17 at 11:34

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